PCAOB Knocks PwC on Auditing

PricewaterhouseCoopers has several significant deficiencies with its auditing, according to an inspection report issued by the Public Company Accounting Oversight Board.

"In some cases, the deficiencies identified were of such significance that it appeared to the inspection team that the firm, at the time it issued its audit report, had not obtained sufficient competent evidential matter to support its opinion on the issuer's financial statements," said the report.

With one unidentified client, the PCAOB said PwC failed to adequately test mortgage-servicing rights and their amortization. In the case of another client, the PCAOB said PwC did not obtain enough competent evidence to support its audit opinion and did not perform sufficient procedures to test consolidated revenues at certain units. With another client, PwC failed to perform sufficient procedures to test accounts receivable, according to the report.

The PCAOB found with another PwC client that the firm failed to test some of the assumptions that management used in its goodwill impairment test. With two other clients, PwC relied on the companies' inventory cycle count process without appropriate testing.

PwC stood by its audit work in its response to the report. "We have concluded that, in each instance, our original procedures were sufficient to support our audit conclusions and the opinion rendered at the time," said a letter from the firm.

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